TaxTMI 
TaxTMI 
2017 (6) TMI 1369
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of exemption u/s. 11 & 12 of the Act. On same set of facts the Commissioner of Income Tax (Appeals) in the subsequent assessment year i.e. assessment year 2011-12 has reversed the findings of Assessing Officer and allowed the appeal of the assessee. Since, the issue involved in both the appeals is arising from same set of facts, hence, these appeals are taken up together for adjudication and are being disposed of by this common order. 2. The brief facts of the case as emanating from records are: The assessee is a trust and was created by trust deed dated 10-02-1930. The assessee is registered u/s. 12A of the Act. The main source of income of the trust is rental income from letting out of commercial properties and interest from bank deposits. During the course of scrutiny assessment in assessment year 2010-11, the Assessing Officer observed that the assessee had given three shops on rent i.e. Shop No. 2, 3 and 4 at 1105, Ravivar Peth, Pune to Shri Purushottam Lohiya, one of the trustees. The rent charged by the trust from Shri Purushottam Lohiya in respect of aforesaid shops is far less than the market rent and the rent charged from other tenants in the same premises. The Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... were rented out to unrelated parties. The property at Sr. No. 4 of the table has been given on rent to M/s. Nanda Stores wherein one of the trustee is a partner. The property at Sr. No. 5 to 7 have been given on rent to Shri Purushottam M. Lohiya one the trustee. The ld. AR submitted that the property has been given on lower rate of rent to Shri Purushottam M. Lohiya in accordance with the covenants of the trust deed. The trust was established way back in the year 1930. The clause 2 of the trust deed categorically states that the trustees and their legal heirs are eligible to enjoy the property without paying rent. The ld. AR referred to trust deed at pages 40 to 48 of the paper book and its English translation at pages 49 to 53 of the paper book. The ld. AR submitted that as per the provisions of section 13(1)(c)(ii), the trust shall cease to enjoy the benefit of exemption u/s. 11 & 12 if any part of the income or any property of the trust during the previous year is used or applied directly or indirectly for the benefit of any person referred to in sub-section 13(3). The person referred to in clause (c) of sub-section (1) includes the trustee of the trust. However, the proviso t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the trustees of the trust. Since, the shops have been given on rent to Shri Purushottam Lohiya in accordance with the terms and conditions of trust deed, there is no violation of provisions of section 13(1)(c)(ii), in view of proviso to said section. 4.1 The ld. AR made an alternate submission, that if at all any disallowance has to be made it should be restricted to the extent of violation of provisions of section 13(1)(c)(ii) and 13(2)(b) of the Act. 4.2 The ld. AR submitted that in the subsequent assessment year i.e. assessment year 2011-12 disallowance was made by the Assessing Officer for similar reasons, in fist appeal the Commissioner of Income Tax (Appeals) after properly appreciating the proviso to section 13(1)(c)(ii) of the Act reversed the findings of Assessing Officer. The ld. AR prayed for setting aside the order of Commissioner of Income Tax (Appeals) in assessment year 2010-11 and confirming the order of Commissioner of Income Tax (Appeals) in assessment year 2011-12. 5. Per contra, Shri A.K. Modi representing the Department vehemently defended the findings of Commissioner of Income Tax (Appeals) in assessment year 2010-11. The ld. DR submitted that the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y or indirectly for the benefit of any person referred to in sub- section (3): Provided that in the case of a trust or institution created or established before the commencement of this Act, the provisions of sub- clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person refer- red to in sub- section (3), if such use or application is by way of compliance with a mandatory term of the trust or a mandatory rule governing the institution: Provided further that in the case of a trust for religious purposes or a religious institution (whenever created or established) or a trust for charitable purposes or a charitable institution created or established before the commencement of this Act, the provisions of sub- clause (ii) shall not apply to any use or application, whether directly or indirectly, of any part of such income or any property of the trust or institution for the benefit of any person referred to in sub- section (3) in so far as such use or application relates to any period before the 1st day of June, 1970 ;" A bare perusal of the above provisi....